Crypto Groups Challenge Illinois Digital Asset Tax in Court

The Crypto Council for Innovation (CCI) and the Blockchain Association have initiated legal action against Illinois' new Digital Asset Tax Act, requesting a Sangamon County Circuit Court to issue a preliminary injunction to prevent the tax from taking effect in January 2027. The organizations argue that the law infringes upon federal and state protections and imposes significant financial burdens on crypto businesses that must prepare for ambiguous regulations.

The Digital Asset Tax Act imposes a 0.2% tax on the value of digital assets involved in exchanges, transfers, or storage through brokers. Unlike traditional taxes, this levy is based on the asset's value rather than the broker's fees. The law mandates that brokers register, collect, and remit the tax while maintaining detailed records, with potential civil and criminal penalties for non-compliance.

In their court filing, CCI and the Blockchain Association contend that the Act violates the federal Internet Tax Freedom Act by taxing digital asset transactions without similarly taxing transactions involving non-digital assets, such as cash or gold. They also highlight the law's vague language, which complicates compliance for businesses trying to determine taxable transactions and asset valuations. The groups warn that the tax could drive customers toward untaxed assets, further harming their operations.

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Source: KLEA News